Raymond James CEO Cautions Investors in Face of Possible Tax Reform

The CEO of Raymond James has a sober outlook for the stock market in 2018, thanks to taxes. What happens on Wall Street in 2018 depends on what happens in Washington and whether lawmakers pass a tax reform package before the end of this year.

Speaking to Fortune, Paul Reilly says, “If tax reform doesn’t pass, I think it will be a fair correction in terms of stock prices.” But he does not agree with some forecasts calling for a crash because “there’s too much fundamental strength in the marketplace.”

As Reilly explains, “Even if prices go down in stocks and money may rotate out to different investments, there’s a lot of liquidity, and investors will come back.”

Meanwhile, what will businesses do with the tax savings that could come from a corporate tax cut? There’s a wide-ranging debate about this. Will they invest the money? Pay down debt? Buy back stock? Reilly believes businesses will invest the savings and add jobs, boosting U.S. economic growth.

“I believe most companies, if they believe the economy is good and they believe there is an overall administration in tone that’s going to be pro-business, they’ll tend to invest,” he says.

Given all the uncertainty going into the new year, Raymond James, which manages nearly $ 700 billion in assets from its headquarters in St. Petersburg, Fla., tells individual investors to keep their investments “diversified,” “look long term,” “stay steady,” and cautions them against “running toward a bull market.”

Watch the video above for more of our conversation with Reilly.